Business owners in Florida are watching after a federal trustee requested that a Chapter 11 bankruptcy be changed to a complete liquidation of a beef-processing plant in South Dakota. The business filed Chapter 11 bankruptcy in July, but the trustee reviewed the company’s financial statements and determined that they couldn’t pay their bills because they are struggling with debt.
The plant was seeking additional financing so that they could hire a company that would help them sell the business. They later pulled out of the financing plan and did not provide other options. However, the trustee reported that they don’t have any assets, apart from the plant, to generate income for their creditors. Changing the bankruptcy from Chapter 11 to Chapter 7 will protect the creditors and keep the process from unnecessary delay.
The property for the plant was initially purchased in 2006 for more than $100 million, but the company didn’t begin production until late in 2012. They have not been able to reach their targeted production goals since opening their doors. They now have $138.8 million in liabilities and about $79 million in assets. Most of the workers have been let go, and production has been stopped. Just more than 40 percent of the ownership of the plant belongs to one man, while the remaining ownership was divided among 69 other investors.
The governor of the state believes that another company might want to take over at the plant and hopes that a buyer will be found during the bankruptcy process. City officials are monitoring the process as well and reviewing the best options for the community.
When a company runs into unforeseen financial struggles, they might wonder if Chapter 11 bankruptcy protection or Chapter 7 liquidation are possible options. A bankruptcy lawyer might be able to help clients determine their best course of action.
Source: ABC News, “Trustee Wants Chapter 7 Bankruptcy for Beef Plant”, Dirk Lammers, August 28, 2013